So you wanted to put up a business stall in town the other day, and when you finally got it, the existing guy asked you to pay up 'goodwill', and when the figure was quoted your jaws dropped. There could be possibly two reasons why your jaws dropped. One, that figure was insane and you didn't even have the slightest idea on why you should pay all that. Two, you have never heard of  anything, anywhere or anyone called 'goodwill' before.

Well, let's make sure you're never blind-sided again

'Goodwill' in Kenyan (Precisely Nairobi) context is usually the irregular amount of money that is charged by the first tenant, landlords or those exiting business premises to an incoming tenant. The consecutive tenants only pay the outgoing tenant. It's viewed as a normal business practice which is not recognised in official real estate practice. Most people dont even give receipts for it.  It's normally regarded to as the previous owner's investment in clientele and marketing that the new tenant takes over in a business premises.

Initially though, these payments were applicable when one intended to move into a business premise in order to carry out a similar kind of business that the previous owner was doing. For instance, if the previous owner had an infamously good cyber cafe and you moving in to put up your cyber cafe, you would pay him that amount as compensation for the ‘good will’ he was about to leave behind for you.

'Goodwill' is never refundable nor convertible it into rent. Goodwill is unregulated and hence landlords and exiting tenants take advantage of this to extort SME investors and this inhibits their growth. According to the International Accounting Standards (IAS) only purchased goodwill or the brand name should be sold.